Optimal two-sided tests for instrumental variables regression with heteroskedastic and autocorrelated errors

Humberto Moreira and Marcelo Moreira

Journal of Econometrics, 2019, vol. 213, issue 2, 398-433

Abstract: This paper considers two-sided tests for the parameter of an endogenous variable in an instrumental variable (IV) model with heteroskedastic and autocorrelated errors. We develop the finite-sample theory of weighted-average power (WAP) tests with normal errors and a known long-run variance. A typical weight choice yields tests with power near zero for parts of the parameter space.

Keywords: Instrumental variables regression; Invariant tests; Optimal tests; Similar tests; Unbiased tests; Weak instruments (search for similar items in EconPapers)
JEL-codes: C12 C30 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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Related works:
Working Paper: Optimal two-sided tests for instrumental variables regression with heteroskedastic and autocorrelated errors (2016)
Working Paper: Optimal two-sided tests for instrumental variables regression with heteroskedastic and autocorrelated errors (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:213:y:2019:i:2:p:398-433

DOI: 10.1016/j.jeconom.2019.04.038

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